Starting your own baking business can be a major undertaking. It takes time, energy, and money to get it off the ground. Some people underestimate how much work opening a bakery entails before they take the plunge and start their own business.
For example, opening a new bakery in New York City can cost as much as $1 million just to get to opening day! So, if you are dreaming of starting your first bakery, start by learning these all-too-common bakery startup mistakes and how you can avoid them.
1. Don’t over-promise and under-deliver.
Remember to focus on your product line first before designing your physical bakery location or online store. What’s important is that you have products people want to buy rather than just having a place to sell baked goods. It might sound obvious, but you might be surprised how often new entrepreneurs get overly focused on store design and neglect recipe development and menu planning.
Try to have unique baked offerings that are not sold elsewhere. Find a unique niche for your bakery — French pastries, custom cakes, Latin or Asian styles, or artisan loaves of bread. If you’re starting an online bakery business, be mindful that your products may need to have a longer shelf life than if they were being sold in the store.
It’s important to know what type of customer base you want before opening your doors. You’ll either want to focus on making everyone happy (full-service bakery cafe) or specialize so that only certain people will be browsing your bakery (gluten-free, wedding cakes, trendy desserts, etc.).
2. Give customers what they want, not what you think they want.
Many baking entrepreneurs struggle with knowing what products to sell to their customers. Here are some tips for developing products or services that they will happily buy from your bakeshop:
3. Be a good listener — listen to customer feedback and act on it.
Customer feedback is one of the most valuable tools you can use in your business. It’s not always easy to get customer feedback, but it pays off when you do.
4. Offer low prices for high-quality products.
To compete with other retailers, you’ll need a range of products at competitive prices, but in some cases, this might mean that your margins could be lower. What’s important is making sure customers are getting good value for their money and you’re making an adequate profit to pay expenses and salaries.
Your customers are your lifeblood and will always be looking for a bargain. So, it’s in your best interests to keep prices low on products you know they want while still maintaining high levels of quality. Take time to negotiate supplier pricing to cut your ingredient costs so you can lower prices for your customers.
5. Make sure your food is fresh.
It’s essential to ensure your food is fresh and made with high-quality ingredients — never rely on ingredients that are past their shelf life. This is mission-critical for bakeries, especially since stale baked goods are never appealing.
6. Keep up with the latest baking trends.
To avoid mistakes in menu planning, keep up with current consumer food trends and preferences. For example, gluten-free desserts have gained a significant market share in recent years.
7. Don’t over-extend yourself.
“You can’t do it all on your own.” According to Christopher Myers from Sugar Snaps Bakery in Brooklyn, trying to do it all yourself is one of the biggest mistakes entrepreneurs make when opening a bakery. Instead, it’s better to have a team of people with specific roles and skill sets rather than one jack-of-all-trades who does everything.
8. Get the right mentor.
“If you’re opening up your bakery business, I would recommend finding someone to mentor you,” says Stacy from Ovenly Bakery in Brooklyn. “Hire somebody to teach you the business side of starting a bakery.”
“There’s no way I could have opened my bakery without having help from other people,” says Christopher Myers. “I would say, find someone who knows what they’re doing and pay them for their time.”
Looking for a business mentor? Our resources can help you find low-cost (and free) mentoring by business experts.
9. Don’t put all your eggs in one basket.
A common mistake made by new bakers is to focus all their energy on just a few types of products and neglect others that could potentially sell well under the right marketing circumstances. Remember that it’s wisest to create a wide assortment of baked goods for your customers to choose from.
Even if you’re focusing on a relatively narrow niche, don’t pre-judge what your best-selling items will be. Offer a full range and let your customers decide their favorites. It’s important for your bakery menu to offer a selection of pastries and cakes that’ll satisfy everyone’s cravings in your target market.
10. Don’t neglect marketing from the beginning.
Since most bakers are passionate about their creations, it’s easy to believe that customers will just flock to your store because they heard about you from friends or family members. However, without proper marketing, this likely won’t happen.
Spend time creating marketing content for your bakery business that’ll attract interested customers, whether it’s through social media, local newspapers, radio stations, or an online store.
BONUS TIP: Don’t underestimate the maintenance costs of having a physical location.
Your rental cost is just one part of paying for a location; you’ll also need to factor in the costs of things like utilities, insurance, maintenance, and waste collection.
It’s important to know what you need to balance your bakery budget before signing any contracts. If allocating funds for marketing or interior design isn’t possible yet, then focus on getting more exposure through social media or an online store while scouting a location that won’t break the bank.
Are you opening a new bakery and need great bakery name ideas? Our list of hundreds of catchy bakery names complete with inspiring logo examples to name your baking business can get you on the right track. It’s filled with creative, unique, edgy, funny, and cute bakery name ideas.
Starting a bakery isn’t easy, and staying open can be even more challenging. These quick quotes can help you focus on what matters.
Some new bakeries fail because they don’t have an experienced person on staff with a background in baking or running a full-time kitchen operation. It’s important to do your research to create a workable business plan.
You can find out how many bakeries in your area have failed in the past by looking at city data on business licenses and other similar records. Historical data will give you an idea of what kind of competition there’s been in the area and how many people are opening (and closing) bakeries.
These are some of the most common reasons for new bakeries to fail.
1. Poor Location
Many people do not want to drive down a dark alley or walk past rundown buildings and warehouses. But, unfortunately, if your business is near one, it could lead to losses in revenue.
Does the location have ample parking? Many bakeries are located in busy business areas, which means they’ll need to provide a place for people to park their cars.
If there’s no parking available and customers have to find street parking or take public transportation, it could lead them away from your establishment.
2. Menu Issues
Appealing menu items are ones that’ll get people to come back for more. Consider these basic tips:
A) Start by following all safety standards in cooking meat products.
B) Include vegetarian and vegan options.
C) Invest in a high-end coffee machine so you can offer fresh-brewed java.
D) Offer healthy alternatives such as salads and fruit plates, especially to those with special dietary needs (i.e., gluten-free or vegan).
E) Consider serving alcohol if your facility permits it, even if it’s just a few selections to make your bakery more interesting and appealing. Plenty of people enjoy the combinations of cupcakes and champagne or apple pie and Irish coffee.
F) Keep an up-to-date list of seasonal produce and other ingredients so you can offer customers the freshest, most appealing choices.
3. Lack of Marketing
Use these marketing strategies to put your bakery out into the world.
4. Inadequate Pricing and Inventory Management
Pricing and inventory management will determine how well your business does in the long run, so it’s vital to get this right from day one in your business plan. There are many different aspects of pricing products, including the cost of materials, labor costs, overhead costs, and markup.
It’s a good idea to have healthy profits built-in when pricing so you’re not leaving too little money after all overhead costs are paid off. You’ll also want to have a high enough price that you can hit your desired markup ratios.
To figure out how much inventory to keep on hand, it’s essential to consider the demand for those items and their lead times (how long it takes to get more from suppliers). You’ll also need to factor in unexpected events such as natural disasters or supply-chain snafus.
It’s a good idea to work with an accountant or someone who has expertise in this area for advice on the different aspects of pricing and inventory management.
One of the most essential aspects when it comes to selling baked goods is inventory ingredient management. The demand for your product can change depending on several things such as supply and demand, price changes, or new competitors in the market. Therefore, you’ll need good forecasting based on historical data and current trends to keep up with these changing supply demands.
Terms to Know: Gross Margin
The difference between the retail price and the cost of goods sold is your gross margin. The gross margin is a measure of profitability calculated by dividing total revenue (the sum of sales plus any returns) by total cost or, even more simply, as the percentage dollar value leftover from sales once all costs have been subtracted from revenues.
5. Careless Supply Chain Management
Supply chain management isn’t only about the products you’re purchasing and selling but also includes other factors such as shipping locations and order fulfillment timing. The supply chain begins with a product’s origins (factories, suppliers, etc.), then moves through different steps in production to distribution and sales. It can sometimes include customer service and returns, too.
It’s good business sense to maintain accurate records on all transactions in your organization’s supply chain, such as product availability and lead times, fulfillment scheduling, and managing changes in the supply chain.
6. Lack of Employee Training and Low Retention
Employee training and retention can be a significant challenge for small business owners. Apart from monetary incentives such as bonuses or increased wages, employers can take steps to keep their best talent happy by investing in employee development.
The best way to build a loyal team is by investing in your people. Ensuring that you’re offering motivating incentives such as bonuses or increased wages can go a long way, but it doesn’t stop there. Investing in the development of your employees through coaching, growth opportunities, and learning new skills is a crucial step to take if you want to build long-term relationships with top talent.
As you can see, there are many avoidable mistakes that new bakeries make. We can help you every step of the way with everything from business formation services to website creation and ongoing compliance assistance. We’re here to help.
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FAQs About Starting a Bakery
While the average profit margin of bakeries is 5-10%, there are some that make 12-15% profit year after year. Some can even have a net profit margin as high as 20%. However, there are also many shops that don’t break even. Overall, according to ZipRecruiter, the average bakery owner in the U.S. makes around $72K per year.
There are many possible weaknesses in owning a bakery, from ingredient spoilage to changes in customer demand and even an increase in competition. One way to combat these problems is by investing in employee training and retention to have a loyal team committed to your business. Another smart strategy is to implement a strict ingredient management system. Fight competition by always featuring new items, flavors, and promotions to keep customers coming back to your bakery instead of the one across the street.
Disclaimer: The content on this page is for information purposes only and does not constitute legal, tax, or accounting advice. If you have specific questions about any of these topics, seek the counsel of a licensed professional.
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